Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

Articles Posted in Bankruptcy
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In this bankruptcy action, the First Circuit vacated the judgment of the district court affirming the order of the bankruptcy court granting summary judgment against Oriental Bank on all of the claims asserted against it, holding that remand was required for further proceedings in which remaining issues could be addressed.Builders Holding Company filed for bankruptcy and then filed an adverse action against the Puerto Rico Infrastructure Financing Authority and Oriental Bank. Builders's surety intervened in the adverse action and filed claims against Oriental Bank. Oriental Bank, in turn, filed counterclaims. All claims in the adverse action pertained to funds that the Financing Authority had directly deposited in Builder's account with Oriental Bank that the bank had taken to set off a debt that Builders owed to it. The bankruptcy court granted summary judgment against Oriental Bank on all claims against it, and the district court affirmed. The First Circuit vacated and remanded the summary judgment against Oriental Bank as to all claims, holding that the bankruptcy court was wrong to find that Article 1795 of the Puerto Rico Civil Code compelled the return of funds Oriental Bank set off against Builders's debt to it. View "Oriental Bank v. Builders Holding Co., Corp." on Justia Law

Posted in: Banking, Bankruptcy
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The First Circuit affirmed the order of the Title III court confirming a plan of adjustments for the debts of the Commonwealth and two of its instrumentalities in this action brought under the Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), holding that otherwise valid Fifth Amendment takings claims arising pre-petition cannot be discharged in Title III bankruptcy proceedings without payment of just compensation.After the court charged with overseeing Title III proceedings confirmed the plan of adjustment at issue several stakeholders brought appeals challenging aspects of the court's confirmation order. At issue was the appeal of the Financial Oversight and Management Board of Puerto Rico challenging the Title III court's conclusion that claimants owed just compensation for the taking of real property by debtors were entitled to receive satisfaction in full for on their claims. The First Circuit affirmed the Title III court's order confirming the plan, holding that discharging valid, pre-petition takings claims for less than just compensation would violate the Fifth Amendment and render a plan providing for such discharge unconfirmable under PROMESA. View "Financial Oversight & Management Board v. Cooperativa de Ahorro y Credito" on Justia Law

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The First Circuit reversed the bankruptcy court's dismissal of Debtor's motion to enforce an automatic stay as to a subsidiary of the Lac Du Flambeau Band of Lake Superior Chippewa Indians, holding that the Bankruptcy Code unequivocally strips tribes of their immunity,Debtor sought to enforce the Bankruptcy Code's automatic stay against one of his creditors, a subsidiary of the Lac Du Flambeau Band of Lake Superior Chippewa Indians (Band). Debtor sought an order prohibiting further collection efforts as well as damages and attorney fees. The Band and its affiliates moved to dismiss the enforcement proceeding, asserting tribal sovereign immunity. The bankruptcy court agreed and granted the motion to dismiss. The First Circuit reversed the decision of the bankruptcy court dismissing Debtor's motion to enforce the automatic stay, holding that tribes are governmental units and, thus, the Bankruptcy Code abrogates tribal sovereign immunity. View "Coughlin v. Lac du Flambeau Band of Lake Superior Chippewa Indians" on Justia Law

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In this appeal arising out of an adversary action filed in a Chapter 11 proceeding in the Bankruptcy Court for the District of Massachusetts the First Circuit affirmed the judgment of the bankruptcy court allowing the debtor to avoid a mortgage, holding that there was no error in the bankruptcy court's judgment.After Debtor filed for Chapter 11 bankruptcy Debtor commenced an adversary proceeding against U.S. Back seeking to "avoid" the mortgage because her name was missing from the certificate of acknowledgment. The district court granted Debtor's motion. The district court affirmed. The First Circuit affirmed, holding that summary judgment was properly granted for Debtor because the omission of Debtor's name from the certificate of acknowledgment was a material defect under Massachusetts law. View "U.S. Bank, N.A. v. Desmond" on Justia Law

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The First Circuit dismissed Appellant's appeal of an order issued by the Bankruptcy Appellate Panel for the First Circuit (BAP) that found Appellant, a Chapter 7 debtor, had no standing to appeal a bankruptcy court order overruling his objection to a proof of claim filed by Scotiabank de Puerto Rico, holding that this Court lacked jurisdiction.The BAP concluded that Appellant did not have appellate standing to challenge the subject order because he had failed to demonstrate that the order had directly or adversely affected his pecuniary interests. Accordingly, the BAP entered judgment dismissing the appeal. The First Circuit dismissed Appellant's appeal, holding that Appellant failed to establish that the challenged order had a direct and immediate impact on his pecuniary interests. View "Neira Rivera v. Scotiabank de Puerto Rico" on Justia Law

Posted in: Bankruptcy
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The First Circuit affirmed the judgment of the Bankruptcy Appellate Panel for the First Circuit (BAP) dismissing this appeal as moot, holding that this appeal was moot.In 2019, Appellant refiled for chapter 13 bankruptcy protection. Briry, LLC filed a motion in the bankruptcy case seeking payment to it of certain insurance funds. The bankruptcy court granted the motion and ordered the trustee to pay over the insurance funds to Briry. Thereafter, Appellant's bankruptcy was dismissed. Appellant appealed to the BAP challenging the bankruptcy court's order releasing the insurance funds to Briry. The BAP dismissed the appeal, concluding that it had been rendered moot by the dismissal of the bankruptcy case. The First Circuit affirmed, holding that when the bankruptcy case was dismissed, this appeal became moot. View "Sundaram v. Briry, LLC" on Justia Law

Posted in: Bankruptcy
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The First Circuit affirmed the judgment of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) Title III court allowing certain expenses incurred by the Puerto Rico Electric Power Authority (PREPA) under a contract entered into with LUMA Energy, LLC and LUMA Energy ServCo, LLC (collectively, LUMA) as entitled to administrative expense priority pursuant to section 503(b)(1)(A) of the Bankruptcy Code, holding that there was no error.In 2017, the Financial Oversight and Management Board for Puerto Rico (FOMB) filed for bankruptcy on behalf of PREPA. In 2020, PREPA entered into a contract with LUMA, a private consortium, to transfer the operations and management of PREPA to LUMA. At issue was whether the Title III court erred in allowing expenses incurred by PREPA under the contract as entitled to administrative expense priority. The First Circuit affirmed, holding (1) section 503(b)(1)(A) applies in Title III cases; (2) the Title III court did not abuse its discretion in applying the requirements of section 503(b)(1)(A); and (3) the Title III court correctly held that 48 U.S.C. 2126(e) prevents it from reviewing challenges to FOMB's certification decision. View "Union de Trabajadores de la Industria Eléctrica y Riego v. Puerto Rico Electric Power Authority" on Justia Law

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The First Circuit affirmed the judgment of the Bankruptcy Appellate Panel for the First Circuit (BAP) affirming the summary judgment entered by the bankruptcy court against the bankruptcy trustee (the Trustee) for an estate of two individuals, holding that an unrecorded mortgage in Puerto Rico is not a transfer of the debtor's property that is voidable by a bona fide purchaser that triggers the bankruptcy trustee's authority to avoid and preserve the lien.Jose Antonio Lopez Cancel and Carmen Nereida Medina Gonzalez acquired a property in Puerto Rico that they used as their primary residence. Banco Popular de Puerto Rico held the mortgage, but the mortgage was never recorded. The bankruptcy court treated the mortgage as a general unsecured claim covered by an earlier discharge order. The Trustee then filed this action to avoid the mortgage and preserve it on behalf of the bankruptcy estate, arguing that the unrecorded mortgage was a transfer of the debtor's property that was voidable by a bona fide purchaser. The bankruptcy court concluded that the Trustee could not avoid and preserve an unrecorded mortgage because, under Puerto Rican law, an unrecorded mortgage is not a property interest. The BAP affirmed. The First Circuit affirmed, holding that there was no error. View "Segarra Miranda v. Banco Popular de Puerto Rico" on Justia Law

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The First Circuit dismissed Plaintiffs' appeal for want of jurisdiction, holding that the Federal Rules of Bankruptcy Procedure (the bankruptcy rules), and not the Federal Rules of Civil Procedure (the civil rules), govern cases that have come within the federal district court's jurisdiction as cases "related to" a pending bankruptcy proceeding. 28 U.S.C. 1334(b).In this case arising from the derailment and explosion in Lac-Megantic, Canada, Plaintiffs brought thirty-nine separate suits against several defendants. The derailment occurred on the watch of Montreal, Maine and Atlantic Railway (MMA). MMA sought the protection of the bankruptcy court. Plaintiffs' suits were removed to federal district court. Plaintiffs subsequently joined Canadian Pacific Railway Company as an additional defendant. The suits were centralized in the District of Maine. The district court later granted Plaintiffs' request to dismiss their claims against all defendants except Canadian Pacific pursuant to a settlement agreement that was part of MMA's plan of liquidation. The district court entered judgment for Canadian Pacific. Plaintiffs moved for reconsideration of their motion to file an amended complaint. The district court denied the motion as untimely. The First Circuit dismissed Plaintiffs' appeal, holding that the Bankruptcy Rules governed the procedural aspects of this case, Plaintiffs' motion to reconsider was untimely, and the attempted appeal was untimely. View "Roy v. Canadian Pacific Railway Co." on Justia Law

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The First Circuit affirmed the judgment of the Title III court holding that Claimants, who invested in mutual funds that owned bonds issued by the Commonwealth of Puerto Rico and filed proofs of claim in the Commonwealth's Title III case, lacked standing to recover damages directly from the Commonwealth for losses suffered by the mutual funds, holding that there was not a basis in law for this lawsuit.The Claimants alleged that they had a right to recover damages directly from the Commonwealth for losses suffered by the mutual funds in those investments. The title III court concluded that Claimants lacked standing because they did not own any bonds issued by the Commonwealth and that the Claimants' ownership interest in the mutual funds did not give them a right to recover against the Commonwealth. The Title III court subsequently denied the Claimants' motions for reconsideration. The First Circuit affirmed, holding that the Title III court did not err in its standing analysis, either in its initial decision disallowing the Claimants' claims or in its consideration of the two motions for reconsideration. View "Diaz Mayoral v. Financial Oversight & Management Board for Puerto Rico" on Justia Law